Inflation is price rise , or is a rise in the general level of prices of goods and services in an economy over a period of time.
India uses WPI figures to gauge inflation trends , while world over CPI inflation data is used . It is but natural that the govt prefers this system, because it is far easier to manipulate wpi index than cpi index.
Inflation (WPI) that had turned negative, thanks to a fall in commodity and metal prices, is now positive and rising fast, thanks to galloping food inflation.
Though people, seeing throught the deceipt, are now calling the govt figures as bogus, they have no real alternative as the BJP is hardly an opposition any more while the Commis are suddenly low profile thanks in turn to a solid defeat. Hey do Politicians ever care ?
World over CPI inflation has fallen/ is falling but in India it rules still in double digits. A simple look at the prices of a few commodities tells a tale of doubling of prices of most agri commodities during the first UPA term or Cidambaram FM term , Wheat from 16 to 25 a kg , Basmati Rice from50 to 110 a kg , Milk from 12 to 26 Rs a litre, Eggs from 18 to 36 a dozen, French beans/Peas from 16/20 kg to 40 a kg. Potatoes from 8 to 12a kg, Onions from 8 to 20a kg.
International data shows a falling trend in food item prices. As per yahoo — Cpi inflation on food has been actually going down internationally – everything from pasta to cereal to olive oil — fell by 0.4 percent.
Politicians including the agri minister freight helplessness, and have postponed the fall in agri commodity prices to post rabi crop.
What amazes me however, is the Pre election dip in food prices that happens before almost every election, especially in agri commodities in Mumbai. I was amazed at how the prices of fruits and vegis pre elections fell around the Maharashtra state elections .
Two weeks post Maharashtra state elections, we still dont have a govt and some food article prices seem to have trippled from the pre election dip .
Dals and pulses which have tripled are expected to go higher as demand has all but increased thanks in part to the deficit financed schemes such as NREGA and MSP.
Politicians control mandis and love to put abnormal amt of controls on future trading at the MCX though this is turning out to be counter productive . But in hindsight, i wonder… Are they in a deep nexus with market participant traders who anyways manipulate the arcaic system?
Eating out has seen a real sharp rise too and my dosa index says that a sada dosa which costed Rs 10, costing Rs 20 pre elections , has gone to 24 now while a lunch plate costing 22/24 is costing Rs 36 to 40 pre is costing Rs45 ~50 post Mah elections.
The Inactive government.
While canvassing for the central election, the current govt has been taking credit both for the abnormal growth during its first term and for not liberalizing the economy and taking precautions to avoid the financial crises, while comparing India with the west. But has our govt really done a good job?
The truth is that the abnormal growth during the first term of MMS was mainly thanks to the steroid economics of US fed, which kept interest rates far too low for far too long creating asset bubbles world over especially in Asia.
India whose post inflation growth during his first term was minimal was partially protected from the financial crisis thanks to Y V Reddys tight leash on the banks, not due to Chidambarams policys, some of which have been disastrous in some aspects.
Both previous and current Fm have been postponing their promised fall in food prices at regular intervals.
Crude has gone up from $55 a barrel to between $75 and 80.
The dollar has fallen appx 20% against the euro, but the rupee has fallen against the dollar, euro and probably the yen . Eventually creative accounting and massive defecits are bound to show up somewhere.
Sugar prices are on a firm uptrend here and international prices are inching up mainly due to speculation based on India’s shortfall.
Expect the powers to be to inflate their way through any future crises, and expect more price rise in rice, sugar, dals and pulses.